A Short sale will allow you to sell your home, without negatively impacting your credit as much as waiting for the bank to foreclose on your home.  The bank could require that you pay off the credit that they give you to allow the sale, but in the new stimulous package agreed by the Congress and the Senate, there is a provision to prevent the IRS from actually taxing you on that credit. Will the bank hound you to pay off the balance of the loan, we don't know. They could.